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The ONE Group Reports Second Quarter 2023 Financial Results

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The ONE Group Hospitality, Inc. reported its financial results for Q2 2023, with total GAAP revenues increasing by 2.8% to $83.4 million. Consolidated comparable sales decreased by 4.7% compared to 2022, but increased by 46.5% compared to 2019. The company plans to open eight to twelve new venues in 2023 and targets a total addressable market of 200 STK restaurants globally and 200 Kona Grills domestically.
Positive
  • Total GAAP revenues increased by 2.8% to $83.4 million in Q2 2023.
  • Consolidated comparable sales increased by 46.5% compared to 2019.
  • The company plans to open eight to twelve new venues in 2023.
  • The total addressable market is 200 STK restaurants globally and 200 Kona Grills domestically.
Negative
  • Consolidated comparable sales decreased by 4.7% compared to 2022.

Opens Kona Grill in Riverton, UT

To Participate in Three Upcoming Investor Conferences

DENVER--(BUSINESS WIRE)-- The ONE Group Hospitality, Inc. (“The ONE Group” or the “Company”) (Nasdaq: STKS) today reported its financial results for the second quarter ended June 30, 2023.

Highlights for the second quarter compared to the same period in 2022 are as follows:

  • Total GAAP revenues increased 2.8% to $83.4 million from $81.1 million;
  • Consolidated comparable sales* decreased 4.7% and increased 46.5% compared to 2019;
  • GAAP net income attributable to The ONE Group was $0.6 million, or $0.02 per share ($0.06 adjusted net income per share)****, compared to GAAP net income of $4.1 million, or $0.13 per share ($0.15 adjusted net income per share)****
  • Restaurant Operating Profit*** decreased 6.6% to $11.9 million from $12.8 million; and
  • Adjusted EBITDA** was $8.5 million compared to $10.4 million.

“We faced meaningful comparisons to last year as comparable sales in 2022 increased 12.8% on a consolidated basis and 19.8% at STK. We are encouraged by the momentum of the business as we saw sequential improvement in same store sales as we moved through the quarter, and we are pleased that we continue to significantly outperform our 2019 comparable sales. We recently opened a new Kona Grill in Riverton, Utah and the restaurant is off to a strong start. In addition, Kona Grill Columbus, STK San Francisco and STK Dallas, continue to perform strongly and above our investment model. We have developed seven new venues in the last twelve months, and we plan to accelerate this pace. As we look into the second half of the year, we have initiatives in place that, we anticipate, will drive positive comparable sales and margin improvements year over year,” said Emanuel “Manny” Hilario, President and CEO of The ONE Group.

Hilario continued, “We expect to open eight to twelve new venues in 2023 and target a new restaurant approximately every four to six weeks for the foreseeable future. We expect the significant investments we have made in our training teams, in-restaurant staffing and in G&A support will begin to show positive returns as we enter this new chapter of growth at The ONE Group. We believe we are early in our expansion story and have significant opportunity ahead, and we view our total addressable market as 200 STK restaurants globally and 200 Kona Grills domestically with best-in-class ROIs of between 40% and 50%.”

*Comparable sales represent total U.S. food and beverage sales at owned and managed units opened for at least a full 18-months. This measure includes total revenue from our owned and managed locations. The Company monitors sales growth at its established restaurant base in addition to growth that results from restaurant acquisitions.

**We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses including incremental costs related to COVID-19, stock-based compensation and certain transactional costs. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net Income to Adjusted EBITDA in this release.

***We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses. Restaurant Operating Profit has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Operating income to Restaurant Operating Profit in this release.

****We define Adjusted Net Income as net income before COVID-19 costs, lease termination expenses, one-time stock-based compensation, non-recurring costs, non-cash rent during the pre-opening period and the income tax effect of any adjustments. Adjusted Net Income has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Refer to the reconciliation of Net Income to Adjusted Net Income in this release.

Second Quarter 2023 Financial Results

Total GAAP revenues increased $2.3 million, or 2.8%, to $83.4 million in the second quarter of 2023 from $81.1 million in the second quarter of 2022.

Total owned restaurant net revenues increased $3.0 million, or 3.9%, to $79.9 million in the second quarter of 2023 from $76.9 million in the second quarter of 2022. The increase was primarily attributable to the addition of STK San Francisco in August 2022, STK Dallas in November 2022, and Kona Grill Columbus in January 2023.

Consolidated comparable sales* decreased 4.7% compared to the second quarter of 2022. STK same store sales decreased 6.8% while Kona Grill same store sales decreased 1.5%. Compared to 2019, the pre-pandemic base year, same store sales for the second quarter of 2023 increased 46.5% compared to the second quarter of 2019; STK comparable sales increased 69.2% while Kona Grill comparable sales increased 25.7%.

Management, license and incentive fee revenues decreased $0.7 million, or 17.3%, to $3.5 million in the second quarter of 2023 from $4.2 million in the second quarter of 2022. The decrease was primarily attributable to a decrease in incentive fees at our managed STK restaurants in North America and decreased revenues in London, England.

Restaurant Operating Profit*** decreased $0.8 million, or 6.6%, to $11.9 million and represented 14.9% of Company-owned restaurant net revenues in the second quarter of 2023 compared to $12.8 million and 16.6% of Company-owned restaurant net revenues in the second quarter of 2022. The decrease was primarily due to higher labor costs driven by wage inflation and investments in anticipation of growth and higher general operating costs.

General and administrative costs increased $0.8 million, or 10.7%, to $8.0 million for the three months ended June 30, 2023 from $7.3 million for the three months ended June 30, 2022. The increase was attributable to increased stock-based compensation expense and additional investments required ahead of new restaurant openings. As a percentage of revenues, general and administrative costs were 9.6% for the three months ended June 30, 2023 compared to 9.0% for the three months ended June 30, 2022.

Pre-opening expenses were $1.6 million for the three months ended June 30, 2023 compared to $0.8 million for the three months ended June 30, 2022. The increase was related to payroll, training, and non-cash pre-open rent for Kona Grill Riverton which opened in July 2023, and STK and Kona Grill restaurants currently under development.

GAAP net income attributable to The ONE Group Hospitality, Inc. in the second quarter of 2023 was $0.6 million, or $0.02 per share, compared to $4.3 million, or $0.13 per share, in the second quarter of 2022.

Adjusted Net Income**** attributable to The ONE Group Hospitality, Inc. in the second quarter of 2023 was $1.8 million, or $0.06 per share, compared to $4.9 million, or $0.15 per share, in the second quarter of 2022.

Adjusted EBITDA** decreased $1.8 million, or 17.6%, to $8.5 million in the second quarter of 2023 from $10.4 million in the second quarter of 2022.

Restaurant Development

The Company intends to open eight to twelve new venues in 2023.

There are currently four Company-owned STK restaurants (Charlotte, NC, Boston, MA, Salt Lake City, UT and Washington D.C.) and one Company-owned Kona Grill restaurant (Phoenix, AZ) under construction. The Company plans to begin construction on a Kona Grill restaurant in Tigard, OR in the near future.

During the first quarter of 2023, the Company opened a Kona Grill in Columbus, OH, two venues through a licensing agreement with Reef Kitchens and a rooftop at an STK in Scottsdale, AZ. In July, the Company opened a Kona Grill in Riverton, UT.

Share Repurchase

On September 7, 2022, the Company commenced a share repurchase program for up to $10 million of its outstanding common stock, and subsequently increased authorized repurchases by $5 million. In the quarter ended June 30, 2023, the Company purchased approximately 0.5 million shares for aggregate consideration of $3.4 million. As of June 30, 2023, the Company had purchased approximately 1.7 million shares for aggregate consideration of $11.3 million under this program.

2023 Targets

The Company is updating the following targets for 2023:

Financial Results and Other Select Data

 

2023 Guidance

Total GAAP revenues

$350M to $365M

Managed, license and incentive fee revenues

 

$15.0M to $15.5M

Total owned operating expenses as a percentage of owned restaurant net revenue

 

83.0% to 82.0%

Total G&A excluding stock-based compensation

 

$27M to $29M

Consolidated Adjusted EBITDA

$45M to $50M

Restaurant pre-opening expenses

 

$5.5M to $6.5M

Operating income

 

$20.5M to $24.5M

Effective income tax rate

 

5% to 10%

Total capital expenditures, net of allowances received by landlords

2.5% of Company-owned revenue and
$3.0M to $3.5M per new Company-owned venue

Number of new system-wide venues

 

Eight to Twelve

Conference Call and Webcast

Emanuel “Manny” Hilario, President and Chief Executive Officer, and Tyler Loy, Chief Financial Officer, will host a conference call and webcast today at 4:30 PM Eastern Time.

The conference call can be accessed live over the phone by dialing 1-412-542-4186. A replay will be available after the call and can be accessed by dialing 1-412-317-6671; the passcode is 10179885. The replay will be available until August 17, 2023.

The webcast can be accessed from the Investor Relations tab of The ONE Group’s website at www.togrp.com under “News / Events”.

Upcoming Investor Conference Participation

The Company plans to participate in the following upcoming investor conferences:

  • The Company will meet in-person with institutional investors at the Lake Street 7th Annual Big Ideas Growth Conference on September 14, 2023 in New York City.
  • The Company will meet virtually with institutional investors at the CL King's 21st Annual Best Ideas Conference on September 18, 2023.
  • The Company will meet in-person with institutional investors at the Wells Fargo 6th Annual Consumer Conference on September 20-21, 2023 in Dana Point, CA.

About The ONE Group

The ONE Group Hospitality, Inc. (Nasdaq: STKS) is an international hospitality company that develops and operates upscale and polished casual, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos and other high-end venues both in the U.S. and internationally. The ONE Group’s focus is to be the global leader in Vibe Dining, and its primary restaurant brands and operations are:

  • STK, a modern twist on the American steakhouse concept with 25 restaurants in major metropolitan cities in the U.S., Europe and the Middle East, featuring premium steaks, seafood and specialty cocktails in an energetic upscale atmosphere.
  • Kona Grill, a polished casual, bar-centric grill concept with 26 restaurants in the U.S., featuring American favorites, award-winning sushi, and specialty cocktails in an upscale casual atmosphere.
  • ONE Hospitality, The ONE Group’s food and beverage hospitality services business, develops, manages and operates premier restaurants and turnkey food and beverage services within high-end hotels and casinos currently operating 13 venues in the U.S. and Europe.

Additional information about The ONE Group can be found at www.togrp.com.

Cautionary Statement on Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “target,” “intend,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to: (1) the effects of the COVID-19 pandemic on our business, including government restrictions on our ability to operate our restaurants and changes in customer behavior, and our ability to hire employees; (2) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain employees; (3) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (4) our ability to successfully improve performance and cost, realize the benefits of our marketing efforts and achieve improved results as we focus on developing new management and license deals; (5) changes in applicable laws or regulations; (6) the possibility that The ONE Group may be adversely affected by other economic, business, and/or competitive factors; and (7) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed for the year ended December 31, 2022 and Quarterly Reports on Form 10-Q.

Investors are referred to the most recent reports filed with the Securities and Exchange Commission by The ONE Group Hospitality, Inc. Investors are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

THE ONE GROUP HOSPITALITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited, in thousands, except income per share and related share information)

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Owned restaurant net revenue

 

$

79,923

 

 

$

76,930

 

 

$

158,502

 

 

$

147,446

 

Management, license and incentive fee revenue

 

 

3,470

 

 

 

4,195

 

 

 

7,447

 

 

 

7,860

 

Total revenues

 

 

83,393

 

 

 

81,125

 

 

 

165,949

 

 

 

155,306

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Owned operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Owned restaurant cost of sales

 

 

19,215

 

 

 

19,851

 

 

 

38,070

 

 

 

37,950

 

Owned restaurant operating expenses

 

 

48,784

 

 

 

44,309

 

 

 

95,611

 

 

 

83,682

 

Total owned operating expenses

 

 

67,999

 

 

 

64,160

 

 

 

133,681

 

 

 

121,632

 

General and administrative (including stock-based compensation of $1,234, $911, $2,554, $1,790 for the three and six months ended June 30, 2023 and 2022, respectively)

 

 

8,039

 

 

 

7,261

 

 

 

15,523

 

 

 

14,140

 

Depreciation and amortization

 

 

3,506

 

 

 

2,926

 

 

 

7,162

 

 

 

5,641

 

Pre-opening expenses

 

 

1,609

 

 

 

804

 

 

 

2,908

 

 

 

1,149

 

COVID-19 related expenses

 

 

 

 

 

221

 

 

 

 

 

 

2,534

 

Lease termination expenses

 

 

 

 

 

 

 

 

 

 

 

255

 

Other expenses

 

 

195

 

 

 

 

 

 

352

 

 

 

 

Total costs and expenses

 

 

81,348

 

 

 

75,372

 

 

 

159,626

 

 

 

145,351

 

Operating income

 

 

2,045

 

 

 

5,753

 

 

 

6,323

 

 

 

9,955

 

Other expenses, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

 

1,642

 

 

 

444

 

 

 

3,429

 

 

 

952

 

Total other expenses, net

 

 

1,642

 

 

 

444

 

 

 

3,429

 

 

 

952

 

Income before provision for income taxes

 

 

403

 

 

 

5,309

 

 

 

2,894

 

 

 

9,003

 

(Benefit) provision for income taxes

 

 

(13

)

 

 

869

 

 

 

148

 

 

 

1,042

 

Net income

 

 

416

 

 

 

4,440

 

 

 

2,746

 

 

 

7,961

 

Less: net (loss) income attributable to noncontrolling interest

 

 

(152

)

 

 

137

 

 

 

(428

)

 

 

(12

)

Net income attributable to The ONE Group Hospitality, Inc.

 

$

568

 

 

$

4,303

 

 

$

3,174

 

 

$

7,973

 

Currency translation gain (loss)

 

 

52

 

 

 

(169

)

 

 

(18

)

 

 

(261

)

Comprehensive income attributable to The ONE Group Hospitality, Inc.

 

$

620

 

 

$

4,134

 

 

$

3,156

 

 

$

7,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to The ONE Group Hospitality, Inc. per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per share

 

$

0.02

 

 

$

0.13

 

 

$

0.10

 

 

$

0.25

 

Diluted net income per share

 

$

0.02

 

 

$

0.13

 

 

$

0.10

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing basic income per share

 

 

31,782,783

 

 

 

32,601,203

 

 

 

31,730,299

 

 

 

32,411,570

 

Shares used in computing diluted income per share

 

 

32,673,457

 

 

 

33,959,991

 

 

 

32,779,821

 

 

 

34,123,142

 

The following table sets forth certain statements of operations data as a percentage of total revenues for the periods indicated. Certain percentage amounts may not sum to total due to rounding.

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Owned restaurant net revenue

 

95.8

%

 

94.8

%

 

95.5

%

 

94.9

%

Management, license and incentive fee revenue

 

4.2

%

 

5.2

%

 

4.5

%

 

5.1

%

Total revenues

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

Cost and expenses:

 

 

 

 

 

 

 

 

Owned operating expenses:

 

 

 

 

 

 

 

 

Owned restaurant cost of sales (1)

 

24.0

%

 

25.8

%

 

24.0

%

 

25.7

%

Owned restaurant operating expenses (1)

 

61.0

%

 

57.6

%

 

60.3

%

 

56.8

%

Total owned operating expenses (1)

 

85.1

%

 

83.4

%

 

84.3

%

 

82.5

%

General and administrative (including stock-based compensation of 1.5%, 1.5%, 1.1% and 1.2% for the three and six months ended June 30, 2023 and 2022, respectively)

 

9.6

%

 

9.0

%

 

9.4

%

 

9.1

%

Depreciation and amortization

 

4.2

%

 

3.6

%

 

4.3

%

 

3.6

%

Pre-opening expenses

 

1.9

%

 

1.0

%

 

1.8

%

 

0.7

%

COVID-19 related expenses

 

%

 

0.3

%

 

%

 

1.6

%

Lease termination expenses

 

%

 

%

 

%

 

0.2

%

Other expenses

 

0.2

%

 

%

 

0.2

%

 

%

Total costs and expenses

 

97.5

%

 

92.9

%

 

96.2

%

 

93.6

%

Operating income

 

2.5

%

 

7.1

%

 

3.8

%

 

6.4

%

Other expenses, net:

 

 

 

 

 

 

 

 

Interest expense, net of interest income

 

2.0

%

 

0.5

%

 

2.1

%

 

0.6

%

Total other expenses, net

 

2.0

%

 

0.5

%

 

2.1

%

 

0.6

%

Income before provision for income taxes

 

0.5

%

 

6.5

%

 

1.7

%

 

5.8

%

(Benefit) provision for income taxes

 

%

 

1.1

%

 

0.1

%

 

0.7

%

Net income

 

0.5

%

 

5.5

%

 

1.7

%

 

5.1

%

Less: net (loss) income attributable to noncontrolling interest

 

(0.2

)%

 

0.2

%

 

(0.3

)%

 

%

Net income attributable to The ONE Group Hospitality, Inc.

 

0.7

%

 

5.3

%

 

1.9

%

 

5.1

%

(1)   

These expenses are being shown as a percentage of owned restaurant net revenue.

THE ONE GROUP HOSPITALITY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2023

 

2022

ASSETS

 

(Unaudited)

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,178

 

 

$

55,121

 

Accounts receivable

 

 

9,486

 

 

 

15,220

 

Inventory

 

 

5,765

 

 

 

5,728

 

Other current assets

 

 

2,344

 

 

 

2,091

 

Due from related parties

 

 

376

 

 

 

376

 

Total current assets

 

 

56,149

 

 

 

78,536

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

111,509

 

 

 

94,087

 

Operating lease right-of-use assets

 

 

88,538

 

 

 

85,161

 

Deferred tax assets, net

 

 

12,311

 

 

 

12,323

 

Intangibles, net

 

 

15,312

 

 

 

15,290

 

Other assets

 

 

4,738

 

 

 

4,774

 

Security deposits

 

 

850

 

 

 

853

 

Total assets

 

$

289,407

 

 

$

291,024

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

11,767

 

 

$

13,055

 

Accrued expenses

 

 

18,277

 

 

 

22,409

 

Deferred gift card revenue and other

 

 

1,274

 

 

 

2,115

 

Current portion of operating lease liabilities

 

 

6,444

 

 

 

6,336

 

Current portion of long-term debt

 

 

1,000

 

 

 

1,500

 

Other current liabilities

 

 

253

 

 

 

256

 

Total current liabilities

 

 

39,015

 

 

 

45,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

 

110,251

 

 

 

105,247

 

Long-term debt, net of current portion

 

 

71,102

 

 

 

70,544

 

Other long-term liabilities

 

 

896

 

 

 

972

 

Total liabilities

 

 

221,264

 

 

 

222,434

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.0001 par value, 75,000,000 shares authorized; 33,311,371 issued and 31,622,234 outstanding at June 30, 2023 and 32,829,995 issued and 31,735,423 outstanding at December 31, 2022

 

 

3

 

 

 

3

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Treasury stock, 1,691,649 and 1,094,572 shares at cost at June 30, 2023 and December 31, 2022, respectively

 

 

(11,322

)

 

 

(7,169

)

Additional paid-in capital

 

 

56,561

 

 

 

55,583

 

Retained earnings

 

 

27,340

 

 

 

24,166

 

Accumulated other comprehensive loss

 

 

(2,887

)

 

 

(2,869

)

Total stockholders’ equity

 

 

69,695

 

 

 

69,714

 

Noncontrolling interests

 

 

(1,552

)

 

 

(1,124

)

Total equity

 

 

68,143

 

 

 

68,590

 

Total liabilities and equity

 

$

289,407

 

 

$

291,024

 

Reconciliation of Non-GAAP Measures

We prepare our financial statements in accordance with generally accepted accounting principles (GAAP). In this press release, we also make references to the following non-GAAP financial measures: total food and beverage sales at owned and managed units, Adjusted EBITDA, Restaurant Operating Profit and Adjusted Net Income.

Total food and beverage sales at owned and managed units. Total food and beverage sales at owned and managed units represents our total revenue from our owned operations as well as the revenue reported to us with respect to sales at our managed locations, where we earn management and incentive fees at these locations. We believe that this measure represents a useful internal measure of performance as it identifies total sales associated with our brands and hospitality services that we provide. Accordingly, we include this non-GAAP measure so that investors can review financial data that management uses in evaluating performance, and we believe that it will assist the investment community in assessing performance of restaurants and other services we operate, whether or not the operation is owned by us. However, because this measure is not determined in accordance with GAAP, it is susceptible to varying calculations and not all companies calculate these measures in the same manner. As a result, this measure as presented may not be directly comparable to a similarly titled measure presented by other companies. This non-GAAP measure is presented as supplemental information and not as an alternative to any GAAP measurements. The following table includes a reconciliation of our GAAP revenue to total food and beverage sales at our owned and managed units (in thousands):

For the three months ended June 30,

For the six months ended June 30,

2023

2022

2023

2022

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Owned restaurant net revenue (1)

 

$

79,923

 

$

76,930

 

$

158,502

 

$

147,446

Management, license and incentive fee revenue

 

3,470

 

4,195

 

7,447

 

7,860

GAAP revenues

 

$

83,393

 

$

81,125

 

$

165,949

 

$

155,306

 

Food and beverage sales from managed units (1)

 

 

30,001

 

 

32,197

 

 

60,703

 

 

60,469

 

 

 

 

Total food and beverage sales at owned and managed units

 

$

109,924

 

$

109,127

 

$

219,208

 

$

207,915

(1)   

Components of total food and beverage sales at owned and managed units.

The following table presents the elements of the quarterly Comparable Sales measure for 2022 and 2023:

 

 

2022 vs. 2021

 

2023 vs. 2022

 

 

Q1

Q2

Q3

Q4

FY

 

Q1

Q2

US STK Owned Restaurants

 

57.1

%

17.8

%

4.0

%

0.2

%

15.7

%

 

1.0

%

(10.1

%)

US STK Managed Restaurants

 

103.6

%

26.6

%

2.1

%

(0.8

%)

21.9

%

 

15.4

%

2.5

%

US STK Total Restaurants

 

66.7

%

19.8

%

3.5

%

0.0

%

17.1

%

 

5.3

%

(6.8

%)

Kona Grill Total Restaurants

 

21.9

%

3.7

%

(3.6

%)

(7.6

%)

2.5

%

 

(4.3

%)

(1.5

%)

Combined Comparable Sales

 

45.1

%

12.8

%

0.5

%

(3.1

%)

10.8

%

 

1.6

%

(4.7

%)

Adjusted EBITDA. We define Adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent expense, pre-opening expenses, non-recurring gains and losses, stock-based compensation, COVID-19 related expense and certain transactional costs. Not all the aforementioned items defining Adjusted EBITDA occur in each reporting period but have been included in our definitions of terms based on our historical activity. Adjusted EBITDA has been presented in this press release and is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP.

The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods indicated (in thousands):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Net income attributable to The ONE Group Hospitality, Inc.

 

$

568

 

 

$

4,303

 

 

$

3,174

 

 

$

7,973

 

Net (loss) income attributable to noncontrolling interest

 

 

(152

)

 

 

137

 

 

 

(428

)

 

 

(12

)

Net income

 

 

416

 

 

 

4,440

 

 

 

2,746

 

 

 

7,961

 

Interest expense, net

 

 

1,642

 

 

 

444

 

 

 

3,429

 

 

 

952

 

(Benefit) provision for income taxes

 

 

(13

)

 

 

869

 

 

 

148

 

 

 

1,042

 

Depreciation and amortization

 

 

3,506

 

 

 

2,926

 

 

 

7,162

 

 

 

5,641

 

EBITDA

 

 

5,551

 

 

 

8,679

 

 

 

13,485

 

 

 

15,596

 

Pre-opening expenses

 

 

1,609

 

 

 

804

 

 

 

2,908

 

 

 

1,149

 

Stock-based compensation

 

 

1,234

 

 

 

911

 

 

 

2,554

 

 

 

1,790

 

COVID-19 related expenses

 

 

 

 

 

221

 

 

 

 

 

 

2,534

 

Lease termination expense (1)

 

 

 

 

 

 

 

 

 

 

 

255

 

Non-cash rent expense (2)

 

 

(123

)

 

 

(54

)

 

 

(154

)

 

 

(85

)

Other expenses

 

 

195

 

 

 

 

 

 

352

 

 

 

 

Adjusted EBITDA

 

 

8,466

 

 

 

10,561

 

 

 

19,145

 

 

 

21,239

 

Adjusted EBITDA attributable to noncontrolling interest

 

 

(65

)

 

 

211

 

 

 

(254

)

 

 

133

 

Adjusted EBITDA attributable to The ONE Group Hospitality, Inc.

 

$

8,532

 

 

$

10,350

 

 

$

19,400

 

 

$

21,106

 

(1)   

Lease termination expense are costs associated with closed, abandoned and disputed locations or leases.

(2)   

Non-cash rent expense is included in owned restaurant operating expenses and general and administrative expense on the consolidated statements of operations and comprehensive income.

Restaurant Operating Profit. We define Restaurant Operating Profit as owned restaurant net revenue minus owned restaurant cost of sales and owned restaurant operating expenses.

We believe Restaurant Operating Profit is an important component of financial results because: (i) it is a widely used metric within the restaurant industry to evaluate restaurant-level productivity, efficiency, and performance, and (ii) we use Restaurant Operating Profit as a key metric to evaluate our restaurant financial performance compared to our competitors. We use these metrics to facilitate a comparison of our operating performance on a consistent basis from period to period, to analyze the factors and trends affecting our business and to evaluate the performance of our restaurants.

The following table presents a reconciliation of Operating income to Restaurant Operating Profit for the period indicated (in thousands):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Operating income as reported

 

$

2,045

 

 

$

5,753

 

 

$

6,323

 

 

$

9,955

 

Management, license and incentive fee revenue

 

 

(3,470

)

 

 

(4,195

)

 

 

(7,447

)

 

 

(7,860

)

General and administrative

 

 

8,039

 

 

 

7,261

 

 

 

15,523

 

 

 

14,140

 

Depreciation and amortization

 

 

3,506

 

 

 

2,926

 

 

 

7,162

 

 

 

5,641

 

Pre-opening expenses

 

 

1,609

 

 

 

804

 

 

 

2,908

 

 

 

1,149

 

COVID-19 related expenses

 

 

 

 

 

221

 

 

 

 

 

 

2,534

 

Lease termination expense

 

 

 

 

 

 

 

 

 

 

 

255

 

Other expenses

 

 

195

 

 

 

 

 

 

352

 

 

 

 

Restaurant Operating Profit

 

$

11,924

 

 

$

12,770

 

 

$

24,821

 

 

$

25,814

 

Restaurant Operating Profit as a percentage of owned restaurant net revenue

 

 

14.9

%

 

 

16.6

%

 

 

15.7

%

 

 

17.5

%

Restaurant Operating Profit by brand is as follows (in thousands):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2023

 

2022

 

2023

 

2022

STK restaurant operating profit (Company owned)

 

$

8,594

 

 

$

9,469

 

 

$

19,056

 

 

$

18,282

 

STK restaurant operating profit (Company owned) as a percentage of STK revenue (Company owned)

 

 

18.9

%

 

 

21.9

%

 

 

20.6

%

 

 

22.2

%

Kona Grill restaurant operating profit

 

$

3,394

 

 

$

3,353

 

 

$

5,895

 

 

$

7,629

 

Kona Grill restaurant operating profit as a percentage of Kona Grill revenue

 

 

9.9

%

 

 

10.0

%

 

 

9.0

%

 

 

11.8

%

Adjusted Net Income. We define Adjusted Net Income as net income before COVID-19 costs, lease termination expenses, one-time stock-based compensation, non-recurring costs, non-cash rent during the pre-opening period and the income tax effect of any adjustments.

We believe that Adjusted Net Income is an appropriate measure of operating performance, as it provides a clear picture of our operating results by eliminating certain one-time expenses that are not reflective of the underlying business performance. Adjusted Net Income is included in this press release because it is a key metric used by management, and we believe that it provides useful information facilitating performance comparisons from period to period. Adjusted Net Income has limitations as an analytical tool and our calculation thereof may not be comparable to that reported by other companies; accordingly, you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

For the three months ended June 30,

For the six months ended June 30,

2023

 

2022

2023

 

2022

Net income attributable to The One Group Hospitality, Inc. as reported

$

568

 

 

$

4,303

 

 

$

3,174

 

 

$

7,973

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

COVID-19 related expenses

-

 

221

 

-

 

2,534

 

Non-cash and other pre-opening expenses(1)

 

1,122

 

 

 

224

 

 

 

1,548

 

 

 

224

 

Other expenses

195

 

479

 

352

 

479

 

Adjusted net income before income taxes

 

1,885

 

 

 

5,227

 

 

 

5,074

 

 

 

11,210

 

Income tax effect on adjustments(2)

(81

)

(290

)

(119

)

(1,280

)

Adjusted net income attributable to The One Group Hospitality, Inc.

$

1,804

 

 

$

4,937

 

 

$

4,955

 

 

$

9,930

 

 

Adjusted net income per share: Basic

$

0.06

 

 

$

0.15

 

 

$

0.16

 

 

$

0.31

 

Adjusted net income per share: Diluted

$

0.06

 

$

0.15

 

$

0.15

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing basic income per share

31,782,783

 

 

32,601,203

 

31,730,299

 

 

32,411,570

 

Shares used in computing diluted income per share

 

32,673,457

 

 

 

33,959,991

 

 

 

32,779,821

 

 

 

34,123,142

 

(1)   

Non-cash and other pre-opening expenses relate to non-cash rent expense and costs for our new store training teams unrelated to new restaurant openings.

(2)   

Reflects the tax expense associated with the adjustments for the three and six months ended June 30, 2023, and June 30, 2022. The Company uses its estimated effective tax rate for the current year and for the previous year.

 

Investors:

ICR

Michelle Michalski or Raphael Gross

(646) 277-1224

Michelle.Michalski@icrinc.com

Media:

ICR

Seth Grugle

(646) 277-1272

seth.grugle@icrinc.com

Source: The ONE Group Hospitality, Inc.

FAQ

What were the total GAAP revenues for Q2 2023?

Total GAAP revenues for Q2 2023 were $83.4 million.

How did consolidated comparable sales perform compared to 2019?

Consolidated comparable sales increased by 46.5% compared to 2019.

How many new venues does the company plan to open in 2023?

The company plans to open eight to twelve new venues in 2023.

What is the total addressable market for the company?

The total addressable market is 200 STK restaurants globally and 200 Kona Grills domestically.

The ONE Group Hospitality, Inc.

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